City-owned fiber network a go as judge tosses telco lawsuit

A judge has dismissed a telco's entire lawsuit against a Minnesota community …

When the 12,000 person city of Monticello, Minnesota voted overwhelmingly to put in a city-owned and -operated fiber-optic network that would link up all homes and business to a fast Internet pipe, the local telco sued to stop them. Wednesday, District Court Judge Jonathan Jasper dismissed the suit with prejudice after finding that the city was well within its rights to build the network by issuing municipal bonds. In this case, however, a total loss for the telco might actually turn out to be a perverse sort of victory.

The judge's ruling, a copy of which was seen by Ars Technica, is noteworthy for two things: (1) the judge's complete dismissal of Bridgewater Telephone Company's complaint and (2) his obvious anger at the underfunding of Minnesota's state courts. Indeed, the longest footnote in the opinion is an extended jeremiad about how much work judges are under and why it took so long to decide this case, even going so far as to cite approvingly a newspaper editorial backing more funds for the court.

Bridgewater's basic complaint was that cities in Minnesota are not allowed to use bonds in order to offer data services to residents, because they lack the necessary authority. State statute says that such bonds may be issued for a host of projects (sewers, stadia, playgrounds, and "homes for aged," among others), and they can more generally be used to fund "other public conveniences." But is Internet access a "public convenience"?

According to the judge, the entire point of the statute is to give cities the money-raising authority they need to "make a city a better place for its citizens to live." The fact that a fee would be charged to access the new fiber network is irrelevant; such fees are also charged to use municipal swimming pools or subway systems or city-owned sports stadia and art galleries.

After a descent into grammar, which—if you weren't aware—is a "complementary analytical tool for understanding how language is used in a statute to convey meaning," the judge got down to the heart of the matter. Cities have the express right to operate a telephone exchange and a cable system; the legislature also noted that the goal of all this was to encourage deployment of "higher speed telecommunications services and greater capacity for voice, video, and data transmission." This indicated that the "public convenience" was certainly meant to extend to data pipes, and the judge tossed the entire case.

Loss=win?

Chris Mitchell of the Institute for Local Self-Reliance, which has been heavily involved in the case, praised the judge's ruling, telling Ars that the entire case was little more than a "delaying tactic." After the Monticello referendum that approved the project, Bridgewater sued the city and immediately rolled out a fiber deployment of its own.

In our own conversation with TDS Telecom, the parent company of Bridgewater, Ars was told that nine crews were in town, laying a 100-mile fiber network (20 miles were complete as of a month ago). That puts the city network at a disadvantage. Without being able to use funds from the bonds, the city has only been able to start construction on a basic loop to connect government offices and downtown businesses. The bigger buildout to residential homes now must be postponed until after Minnesota's harsh winter, potentially giving TDS a big head start.

The city's FiberNet installation (courtesy MonticelloFiber.com)

In Mitchell's view, this was the only point of the lawsuit; even in defeat, Bridgewater has tied the project up for six months and delayed it into next year. TDS, for its part, insists to us that it simply wanted to protect taxpayers from covering an expensive system that TDS itself could operate more efficiently.

The telco might still appeal the ruling, but Mitchell was optimistic. "We've seen cities win these cases" all across the US, he said, and the Minnesota ruling should give other cities in the state a "giant green light" to roll out such projects of their own.

As for Monticello, it will now have the profligate luxury of having two fiber optic networks where most cities have none. Monticello's actions certainly spurred the TDS deployment, but the city now will have to compete with a telco for customers, as both offer similar services. Unlike the city, TDS can also undercut the city's network on cost by subsidizing it with profits from the many other communities where the company operates, and no doubt TDS would like nothing better than to see the city's project turn into an expensive, underused boondoggle.

"See?" it can say. "We sue because we care. And we turned out to be right."

Update

In a statement, Drew Petersen of TDS Telecom makes the best of bad situation. "While disappointed with the courts decision," he writes, "we believe Judge Jasper recognized, on several occasions, including in his written decision, the validity of our suit when he states, 'the Court found that this litigation presented a substantial issue of statutory construction.'"

Having your entire case dismissed on the merits can't feel like much of a victory, though the judge's words will allow the company to dispute the charge that the lawsuit was merely a frivolous delay tactic. TDS also stresses its commitment to its own fiber buildout and says that it "will continue to move forward with our construction plan to complete our fiber network by the end of the year."